Most analyst and media attention went to Apple’s first decline in profits in 13 years, falling iPhone sales and the slowdown in China. Above Avalon analyst Neil Cybart, however, points to spending that has captured almost no attention lately: Apple’s R&D spending, which has increased three times the “usual” amount the company spent four years ago, as it is on track to reach $10 billion for this year alone.
This means that Apple is working on something big, Cybart concludes, and considering the rumours of an electric car, this could make sense.
As noted by Cybart, Apple was spending a little over $3 billion per year in R&D just four years ago. In an exhibit inserted in his piece, he associated R&D spending with product launches. For example, Apple’s annual spending on R&D has doubled ahead of iPad launches compared to the amount it spent before iPhones hit the market. Still it was below $2 billion.
Since then, R&D spending has kept on increasing, hitting the $8 billion mark the year the Apple Watch was officially unveiled. That was last year, and in 2016 R&D spending is on track to surpass $10 billion. Cybart forecasts that next year R&D spending will be even higher, surpassing the $12 billion mark.
Cybart believes this spike in spending is primarily related to Apple’s work on Project Titan, its own electric car, as spending $10 billion just to come up with new Watch bands, larger iPads, and a video streaming service sounds a bit awkward. “Instead, Apple is planning on something much bigger: a pivot into the automobile industry,” he says.
You can read his the full article on Above Avalon.